Can Videocon save itself from this giant mess?

The company which was once a dominant players in television market, also ventured into oil and gas, Special Economic Zones and telecomJoel Rebello | ET Bureau | May 10, 2017, 09:41 IST

(Thinkstock Images)Dena Bank has become the first lender to classify Videocon Industries as a bad loan potentially opening a can of worms for the rest of the banking sector which is already plagued by rising stressed assets.

Videocon was always talked about as a potential NPA candidate privately by bankers. Now with Dena Bank biting the bullet, other public and private sector lenders may also have to follow suit creating a crater in some bank books that could wipe out profits, analysts said.

"This account was always on the watch. Now it has classified as an NPA. It means that the problems of the banking sector are far from over. We could potentially see other banks also classifying this account as an NPA," said Suresh Ganapathy, analyst at Macquarie Securities.

Some estimates put the total banking sector exposure for Videocon at Rs 40,000 crores and even if half of these loans are classified as NPAs it could widen the hole for all lenders who are already struggling to clean up their books.

The company which was once a dominant players in television market, also ventured into oil and gas, Special Economic Zones and telecom.

"It may not be right to expect all the Rs 40,000 cr to become NPAs but it is fair to say a large chunk of it may have to be classified as bad. Public as well as private sector banks may be hit because of these new NPAs like Videocon," Ganapathy said.

Large public and private sector banks and also some foreign banks have an exposure to Videocon. All that can come to roast in the next six months as other banks may also have to classify this account as NPA.